The US Dollar is lower against all 16 of its most actively traded counterparts as stocks and commodities extend their winning streak into a fourth day. The negative outlook for the global economy has been at least tempered for the time being with economic data registering a bit better than expected and on signs that central bankers are tackling the problems facing the economy. The headline news this morning is the NFP and unemployment reports out of the US. Payrolls registered better than expected at 103K, and last month's flat reading was upwardly revised to +57K. Private payrolls faired even better, adding 137K positions, but manufacturing payrolls declined by more than expected, dropping 13K versus an anticipated flat reading. The unemployment rate remained steady at 9.1%, but the underemployment rate unexpectedly rose to 16.5% from 16.2% last month. While the NFP report is a welcome relief, it is somewhat at odds with a report earlier this week that showed companies were planning more than 200% more layoffs in the coming months than this time last year. Announced cuts at Bank of America and by the US military skew the number, but may be harbinger for a coming trend of less government jobs and continued struggles in the financial sector. Nevertheless, today's numbers have encouraged investors to shift capital into riskier higher-yielding assets.
The EUR extended its weekly gains this morning as the better-than-expected US data encouraged investors to seek higher yields. However, the common currency's gains have been limited to its recent ranges on the persistent fears that Greece will default. Currently, credit default swaps are pointing to a 91% chance of non-payment. French President Sarkozy and German Chancellor Merkel will meet this Sunday in Berlin to discuss the fallout from a potential so-called orderly default. The regions banking sector has also become a cause for concern as credit tightens and institutions are increasingly turning to the ECB's lending facilities as a last resort. Overnight, Moody's downgraded the credit rating of 9 Portuguese banks, another one of the Eurozone's troubled markets. While the lack of any major developments in the Eurozone's debt saga and the encouraging US data has provided support for the EUR in the near term, its topside potential will remain limited until a concrete plan of action on further backstopping the regional economy is established.
Sterling extended its gains from late yesterday this morning as speculation mounts that sovereign buyers, most notably the SNB, have been adding GBP to their FX portfolios. However, British policymakers must be a bit dismayed by the rally a day after the BoE announced that it would be adding additional capital to asset purchasing program. The Bank appears to be more focused on promoting economic growth through increased liquidity and a cheaper pound, rather than combating inflation. The increased program should however cap the pound's upside despite the sovereign interest in the near term. Overnight, Moody's also downgraded the credit rating of eight British banks as the UK economy remains in dire straits.
The JPY is flat this morning after the BoJ left its monetary policies on hold. BoJ Governor Shirakawa did, however, tell reporters that the yen's strength risks lasting damage on the nation's economy. If the yen remains at its current levels for a prolonged period of time, or appreciates even further, companies will likely look to shift manufacturing out of Japan as the costs become unsustainably high. However, with market risk appetite remaining tepid at best, the yen will remain attractive as a relatively safe asset.
The Commodity Currencies are generally higher this morning as rising stocks and commodities encouraged investors to seek higher yields. Oil continued its push higher to $83/bbl, gold was at $1654/oz and copper rose to $328/lb. The CAD was higher as the price of oil, Canada's main export, surged and after the better-than-expected NFP report was released in the US, the primary destination for Canadian exports. With no major economic news to dissuade investors, the AUD and NZD both posted solid gains against the majority of their counterparts as investors sought their G10-leading yields. The optimism heading into this weekend's meeting between French and German policymakers has also boosted the ZAR with the Eurozone being the main destination for South African exports.
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This market summary is prepared by Union Bank's Global FX Department for the general information of its customers. It is based on the most accurate information currently available, but should not be considered investment advice or a guarantee of future exchange rates or trends.